The privatisation of PIA has been presented as a landmark reform, meant to reduce the fiscal burden of loss-making state enterprises and satisfy one of IMF conditionalities. However, the structure and sequence of this transaction raise serious questions about whether this was a genuine market-led privatisation or a state-managed recapitalisation carried out at public expense.
Before the sale, more than Rs600 billion in PIA’s legacy debt was shifted to a newly created government holding company, effectively rendering the airline debt-free. From a corporate perspective, this made PIA far more attractive to investors. The government then sold a 75% stake to a consortium led by Arif Habib Corporation for a headline price of Rs135 billion. Yet reported details indicate that only about Rs10 billion was paid directly to the government in cash, while the remainder was to be injected into PIA itself as capital for operations and restructuring.
From a public-finance standpoint, this distinction is crucial. Capital injected into a company controlled by the buyer is not payment to the state; it is investment in an asset the buyer now owns. The state, meanwhile, retains responsibility for the transferred debt. In effect, past losses were socialised while future upside was privatised. This may be legally permissible, but it demands exceptional transparency.
The situation became more concerning when FFC joined the consortium after the bid was finalised, despite not participating in price discovery. In orthodox privatisations, auctions are meant to reveal both price and the final risk-bearing buyer. Post-bid entry by a major institutional actor undermines that purpose and creates risk asymmetry.
The concern is not whether the new owners can make PIA profitable – they likely can. The concern is whether this process maximised public value and met standards of legitimacy. Without full disclosure of the sale agreement, retained liabilities, ownership structure and future guarantees, public skepticism will persist.
Privatisation should build trust, not deepen suspicion. Transparency is now essential, not only for PIA, but for the credibility of Pakistan’s broader reform agenda.
Faisal Siddiqi
Mississauga, Canada
